USDA Loans
USDA loans Michigan are special zero down payment home loans meant for low- to moderate-income homebuyers. These mortgages are guaranteed by the United States Department of Agriculture (USDA). USDA construction loans come with below-market interest rates.
Pros
Such a lending program allows banking clients not to spend years creating savings. You can borrow a high amount by pledging a purchase – an apartment in the primary or secondary market.
Fundraising can take not only years but even decades. It is not known whether a person will have enough opportunities to rent a house while saving money for a down payment. If an inexpensive apartment or studio is purchased for a mortgage, the monthly loan payment is quite comparable to the rent for housing.
The next important plus is that you do not need to sell another property registered in the ownership, but you can rent it out and block the loan payments. There is no need to take additional loans, worry about the down payment – the problem with housing is solved immediately without a single penny.
Cons
No matter how profitable this lending option may seem, there are plenty of disadvantages to this solution. For instance:
- The number of options available for a loan without a start-up payment is extremely limited. The payer may have to buy illiquid assets – corner apartments, housing with an unpopular layout, high or low number of floors, etc .;
- The interest rate on such programs is usually always higher than the standard rates for customers who made a down payment of 20%. You will have to overpay annually or make tough savings in order to reduce the amount of debt as quickly as possible;
- Increased requirements for the buyer. Banks will carefully check the reputation of the borrower – the length of work in one place, income, credit history;
- High probability of failure. U.S. lenders have tightened the requirements for borrowers applying for USDA loans Michigan without a down payment. The number of such offers on the real estate market will fall, and the potential buyer will have to constantly monitor special offers from developers.
One can understand representatives of the banking sector: when providing a loan without a down payment, the lender is at great risk. The inspector has a lot of questions: will a person who has no savings be able to pay off debt on time? How stable is his/her financial position? Will the borrower lose his/her job?
The days when property prices were constantly rising are over. The housing market is in stagnation, and some owners of the secondary housing have to reduce prices, hoping for a quick sale. In the event of a crisis in the economy, the first defaulters will be those clients who have no savings and who took USDA loans without a down payment.